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Tax Avoidance On the Rise: It's Twice the Amount of Social Security and Medicare

Tax Avoidance On the Rise: It's Twice the Amount of Social Security and Medicare

Three trillion dollars a year. That's how much the wealthiest Americans avoid through the system of subsidies and schemes and sweet deals that deprive middle-class workers of their earned benefits. That's three times more than the deficit. That's enough for a full-time job for every middle-class household in America. Here are the distressing details:

1. Tax Expenditures: $1.25 trillion

These subsidies from special deductions, exemptions, exclusions, credits, capital gains, and loopholes are estimated to be worth 7.4% of the GDP, or about $1.1 trillion. They largely benefit the richest taxpayers. Business subsidies bring the total to $1.25 trillion.

According to the IRS, 17 percent of taxes owed were not paid in 2006, leaving an underpayment of $450 billion. The largest share of that came from underreporting of income.

3. Tax Havens: up to $250 billion

(a) It's estimated that between $21 and $32 trillion is hidden offshore, untaxed.
(b) 40% of the world's richest individuals are Americans. That's $8 to $12 trillion of the total.
(c) The historical annual stock market return is 6%. That's a return of $480 to $720 billion.
(d) The 20% to 35% tax loss amounts to a minimum of $96 billion, a maximum of $252 billion.

4. Corporate Taxes: $250 billion

For over 20 years, from 1987 to 2008, corporations paid an average of 22.5% in federal taxes. Since the recession, this has dropped to 10% -- even though their profits have doubled in less than ten years. The missing 12.5% on $2 trillion in profits amounts to $250 billion a year.

5. Financial Transaction Tax (FTT): $500 billion

The absence of an FTT constitutes tax avoidance. Not a penny of sales tax is paid on U.S. financial transactions, which have been estimated at about three quadrillion dollars annually, or three thousand times the deficit. No sales tax is paid despite the high-risk nature of "flash trading" that can lose entire pension funds in a few seconds.

This extremely regressive tax costs the richest Americans only a small fraction of what everyone else pays. If the 12.4% tax (half employer, half employee) were assessed on the full $3.84 trillion claimed by the richest 10% in 2006 (instead of on $1.43 trillion: $110,000 times 13 million payees), an additional $300 billion in revenue would have been realized.

7. Estate Tax: $100 billion

A repeal of the estate tax, which is designed to impact only the tiny percentage of Americans with multi-million dollar estates that have never been taxed, would cost the nation about $100 billion per year.

Conclusion

The total surpasses $3 trillion. The figures may be on the high end, and there may be some overlap, and wealthy Americans may argue that much of it is legal. But the system of loopholes and deductions and exclusions is a statement by the rich that they don't have to pay for their lopsided share of benefits, and that middle-income Americans should give up their own earned benefits to pay the country's bills.

And if tax avoidance is legal it's because the people with money have redefined 'legal.'

THE LAST FIREWALL AGAINST THE LIES

Independent media has become the last firewall against government and corporate lies. Yet, with frightening regularity, independent media sources are losing funding, closing down or being blacked out by Google and Facebook. Never before has independent media been more endangered. If you believe in Common Dreams, if you believe in people-powered independent media, please support our critical Winter campaign now and help us fight—with truths—against the lies that would smother our democracy. Please help keep Common Dreams alive and growing.

Further

With evidence growing that prayer will not stop bullets from killing school children, the kids themselves are stepping up to be the grownups in the room and say the NRA and their fucking guns must go. Just down the road from the latest slaughter, they walked out of class and held livid, poignant signs declaring it's time to protect our kids, not their guns. The chorus swells. Vote all the blood-soaked lackeys out.